In the first week of filming for Blue Jasmine, her first movie with director Woody Allen, Cate Blanchett feared she might be fired. It was just a simple scene but Allen wasn't happy. ''He said, 'It's awful, it's not working'.''

Blanchett is sitting in a Sydney hotel room recalling the eight takes required to nail the scene in mid-2012. ''I thought, 'I'm really not going to last the week'.''

She had watched Robert B. Weide's Woody Allen: A Documentary during the flight to the US for filming. She knew there would be little small talk on set; that Allen is unforthcoming with direction and likes to do scenes in one take. Perhaps, she thought, he was unhappy with her work.

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She need not have worried. Later it emerged Allen hadn't liked anything about the scene, which he dropped in the final cut. Blanchett, playing the character Jasmine French, was not the source of his worries. In July he told Variety that it was ''like having an atomic weapon or something, to get an actress like that''.

Critics are claiming that 44-year-old Blanchett's performance as the self-absorbed, Xanax- and alcohol-addled Jasmine, a woman who has lost everything - her philandering white-collar fraudster husband, her status as a New York society princess, and her mind - is her most extraordinary yet. The chatter is that her first major role since stepping away from the position she shared with her husband, Andrew Upton, as artistic director at the Sydney Theatre Company will earn her an Oscar nomination, at the very least, for best actress.

Cate Blanchett wearing a dress picked by costume designer Suzy Benzinger in Woody Allen's Blue Jasmine. Photo: The New York Times

''I was over the moon when he threw Jasmine at me. Because she's so complicated and so combustible and so confused - delusions of grandeur to an epic proportion,'' Blanchett says. When a broken Jasmine arrives at the ''homey'' San Francisco apartment of her grocery shop-assistant sister, Ginger (Sally Hawkins), she's wearing Chanel and carrying monogrammed Louis Vuitton luggage.

Today Blanchett is wearing a pyjama-ish ensemble in limpid cream silk. It's surely Armani. She has tiny silver studs in her ears, large ears, the only remote imperfection in her luminous beauty.

On the night she took the call from Allen, Blanchett was at home in Hunters Hill cooking dinner for her three boys - Dashiell, Roman and Ignatius. She'd had some warning he'd be calling. ''You'd better answer it,'' Upton recalls telling her. ''Because at some point it's going to be Big W.'' What she remembers most about the call is how short it was, maybe two minutes. Yes, she said, she'd love to read the script.

Blanchett later learnt that Allen had seen her in the 1999 film The Talented Mr Ripley, liked her in it, and tucked her name away for future consideration. In San Francisco last year, she dined with him and his wife, Soon-Yi (the adopted daughter of his former partner, Mia Farrow, with whom he famously began an affair while still with Farrow). ''We all want to lay our offerings at his altar [but] he's not sacred at all; he's the least pretentious person I think I've ever met,'' Blanchett says. ''You can literally talk to him about the insoles of your shoes at the same time you can talk about Bergman.'' But Allen didn't talk about A Streetcar Named Desire.

Blue Jasmine seems almost certainly to be the director's nod to the Tennessee Williams' play; Jasmine a creation in the image of the tragic Blanche DuBois, a role that Blanchett made her own on stage in Sydney and New York. ''I had assumed he'd seen it. But he hadn't. Or if he did, he didn't say anything about it.''

There are similarities between the play and the film's set-up - in the sisters' relationship and in the similarly crumbling lives of Jasmine and Blanche - but Blanchett says it would have been pointless to overlay Blanche DuBois on Jasmine French. ''But I think with any great role, like with Richard II [her role in The War of the Roses] or Lotte Kotte [Gross und Klein], or with Claire in The Maids who I've just played, they stretch you as an actor and I think … expand your imaginative capacity, and the detritus of those characters stays with you.''

If Streetcar provided a set-up and a skeletal form for Allen's anti-heroine, the global financial crisis, the Bernie Madoff case, and the amoral excesses of the American financial markets provided a rich seam to mine for his story. ''You could say that Jasmine French is a construct of how hollow the fabric of American society is, the surface nature of it and how much that's collapsed,'' Blanchett says.

English actor Hawkins first met her co-star in July last year. Blanchett was performing in the Sydney Theatre Company's New York run of Uncle Vanya and the two went out for drinks after one night's performance. In the days that followed, they started to work on the backstory of Jasmine and Ginger, sitting in Blanchett's hotel room, searching for the ''clues'' to their characters in Allen's script, locking in ''memories'', and creating ''a code'', ''an unspoken language''. ''I was so relieved that Cate … adores that kind of prep just as much as I do,'' Hawkins says.

Blanchett's preparations also included long lunches for the purpose of people-watching and note-taking. ''Aren't you always people-watching?'' she asks, taking a sip of water, dribbling it down her silk pyjamas, laughing. ''I just went for a lot of lunches on the Upper East Side. I went to the restaurant incognito, sat in the corner and had far too many glasses of rosé´, because I hate sitting in restaurants by myself. I ended up getting a little bit tipsy.''

Blanchett is famously down-to-earth. There might be a star with her name on it embedded in a Hollywood pavement and some of the most prized awards in the acting firmament in a cupboard somewhere - among them an Oscar for best supporting actress for her role as Katharine Hepburn in The Aviator - but there is not a glimmer of pretension or superiority.

Her colleagues adore her. In an interview with Vanity Fair, her Blue Jasmine co-star Alec Baldwin said that being around her was like being on cocaine. ''She's an extraordinary human being,'' says her friend, actor Marta Dusseldorp, who first worked with her on the film Paradise Road and then shared a dressing room with her during The War of the Roses.

Dusseldorp says Blanchett is ''hilarious, a natural clown''.

Her comedic skills and sharp wit were on show during an interview in July with the Late Show's David Letterman. It created somewhat of a social media storm. Letterman raised the subject of Tasmania - ''Is that Australia?'' he asked - to which she replied, ''Wikipedia's quite useful''. ''Cate Blanchett gives David Letterman a gentle lesson on American insularity,'' said one on Twitter.

''She's great fun,'' says Adelaide-born theatre director Benedict Andrews in a phone call from his home in Reykjavik, Iceland. ''As part of the theatre company they often have a lot of visiting guests, and she and Andrew are always great hosts.''

But Andrews reserves most of his praise for Blanchett's work. She has ''precise, multifaceted access to her emotions; an ability to make her emotions shared and felt and articulated with other people; an ability to take other people into what [her character is] thinking, which in the end, is the simplest and most complicated thing an actor does''.

Andrews directed Blanchett in The Maids for the STC but says her 2011 outing in German playwright Botho Strauss' Gross und Klein was a pinnacle. ''It was one of the most extraordinary things I've ever seen on stage … The performance was excruciatingly funny, like a clown dancing on an abyss, and very, very touching.''

Dusseldorp says she came to understand the power of Blanchett during The War of the Roses. ''She seduces and entertains an audience, but then she flips it like she does in Blue Jasmine and just rips their heart out with her humility and her vulnerability, and that's her gift, I think. She brings people very close to her, exposes everything, so you actually feel like you're watching someone you love dearly go through something very painful or exciting.''

Norwegian actor and director Liv Ullmann, who directed Blanchett in Streetcar for the Sydney Theatre Company, says something similar. ''She does what very few actresses do: she doesn't only show the soul, what is inside of you, she also dares to show what is not always pleasant and, by being so honest doing that, she is incredible.

''Most actresses try to defend themselves or their characters so they will in the end be sympathetic. Cate does not think that way, and that is why her characters always are sympathetic because we recognise ourselves in her.''

Blanchett says the roles she has taken on in the past few years with the STC have made her a better actor. ''I'm not saying I'm happy with what I've done in Blue Jasmine, I'm never happy, but I've got better and it's from tackling those great roles and failing and getting up again every night.''

Her husband sees more great roles in her future - ''there are some great Chekhov roles I'd love her to look at'' - and also thinks ''there's a great director in there''.

In the meantime, Blanchett has become the face of Giorgio Armani's women's fragrances in what is rumoured to be a $10 million contract, and is starting to fill her diary with film roles. She will be seen later this year with George Clooney and Matt Damon in The Monuments Men, a drama about the team charged with rescuing important art and artefacts from Hitler's Nazi regime. She is also in the forthcoming Terrence Malik film Knight of Cups, and will shoot Carol, based on a Patricia Highsmith novel, next year.

And then there are her boys. She's a phenomenal mother, Hawkins says. ''Her kids are testament to her and Andrew really. They're just lovely boys and they're her life.''

As our interview draws to a close, I ask Blanchett how she juggles everything. She pulls out her diary, a battered turquoise Filofax. She lives by it, she says, then recites moments from it: ''Look, there we go: get my son touch typing, taekwondo classes, violin teacher, tap lessons, Ros and Gil opens [Rosencrantz and Guildenstern], go flying with a friend …''